Police will not back a proposal for a three-strikes warning scheme for "social dealers" of class C drugs.

The Law Commission issued a report yesterday on the 35-year-old drug laws, saying there was room for "a more flexible approach to small-scale dealing and personal drug use", particularly when linked to addiction.

A new system of warnings for personal possession and "social dealing" of drugs is proposed, with three warnings for a class C drug offence before an offender would be ordered to attend "a brief intervention session". Two warnings would apply for class B drug offences, and one for class A. There should also be a presumption against imprisonment for those prosecuted for "social dealing" that had no profit for the dealer, the report says.

"Responding to the possession and use of drugs occupies a significant amount of police and court time and attention," it says.

There are concerns about criminal sanctions for people whose drug use may be causing no serious harm to others or may be associated with underlying health problems or drug dependence.

The report also suggests that the Government should carry out clinical trials on the effectiveness of cannabis for medicinal purposes.

Nearly half of New Zealand's adult population has used cannabis at some point in their lives and about one in seven were classified as current users in 2006. The report says there should be no changes that dilute prohibition of drug use. "However, there is room for taking a more flexible approach to small-scale dealing and personal possession and use."

The police submission on the report, obtained by Fairfax, objects to the proposals for a "cautioning" approach.

Assistant police commissioner Grant Nicholls told the commission that police believed "social supply" may be difficult to accurately identify and it could be used to mask commercial drug dealing.

"It may be difficult to identify if social dealing has actually occurred ... and to prove that there is no profit or element of commerciality involved."

Police raised concerns about giving warnings for the use of class A or B drugs, which counted as "serious offending".

Police also disagreed with a proposal to dump the presumption for a sentence of imprisonment for social supply and to make the possession of drug utensils legal.

Associate Health Minister Peter Dunne said social dealing was an issue that would "need to be worked through very carefully".

"I think they're [the Law Commission] correct in their presumption that this has to be treated as a health issue primarily and I think that then the consequences of how that works out in practice do need to be worked through a little bit more clearly with the Government and other relevant agencies."

Green Party co-leader Metiria Turei said too many resources were directed into criminalising people rather than providing them with medical help.

"This new approach, if adopted, will actually save money, enabling greater resources to be directed into health services for breaking the cycle of drug abuse and addiction. It will also free police to tackle more serious crime."

WHAT THE COMMISSION RECOMMENDS

The Law Commission has made 144 recommendations. They include:

Repealing the Misuse of Drugs Act 1975 and replacing it with a new act, administered by the Health Ministry.

Introducing a "caution" system for personal use and possession, with drug users given a warning rather than be arrested for personal drug offences. Users could be caught once for class A offences, twice for class B offences and three times for class C offences before they could be prosecuted.

Retaining the "ABC" drug classification system, but carrying out a review of classifications to ensure consistency. Making it legal to possess utensils for the purpose of using drugs.